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FEATURE Texas: The Corporate Welfare State How Gov. Rick Perry’s use of the Enterprise Fund is wasting taxpayer dollars. BY PAUL SWEENEY At first glance, Countrywide Financial Corp. seems an unlikely candidate for public assistance. It ranks as the nation’s No. 1 home mortgage lender. Headquartered in the tony Los Angeles suburb of Calabassas, California, the sprawling financial services company outsold such household names as Wells Fargo, JPMorgan Chase, and Bank of America last year, racking up annual revenues of $8.57 billion and net earnings of $2.20 billion. That’s an astonishing 25.6 cents of profit for every dollar of sales. Though principally a mortgage lender, Countrywide is a shrewd cross-seller. Using its in-house commercial bank, which boasts a sturdy $43 billion in assets, as well as insurance and securities subsidiaries, the company can load up a single customer with a passel of financial products. That business strategy helped catapult the company to No. 146 on the list of Fortune 500 companies. Any way you do the math, Countrywide adds up to a mean money machine. Even so, the company is not too proud to do a little money-grubbing. Last year, Countrywide put the touch on Texas’ taxpayers for a cool $20 million in cash subsidies. It also won an additional $2.2 million in the form of tax breaks over the next 10 years from local tax districts north of Dallas, according to city of Richardson officials. And it’s not alone. Countrywide is just one of 16 companies that have gotten in on the corporate subsidy game in Texas whenever they expand or relocate. In the name of bringing jobs to Texas, beneficiaries that have collected $215 million in taxpayer largesse over the last 15 months include such Another $10 million will go to Tyson Foods, although the final contracts for the deal have yet to be inked. Critics of the practice say that providing such public subsidies and tax breaks to big business is like paying 17-year-old boys to think about sex. Few states lavish money on big business with quite the same ardor that Texas doesone reason that. Site Selection magazine, the industry bible, conferred on the Lone Star State the title of the state with the No. 1 business climate. The enabling legislation for the Enterprise Fund, passed in 2003 at the behest of Governor Rick Perry, authorizes the governor’s office to spend money on a range of activities: economic development, infrastructure development, community devel 6 THE TEXAS OBSERVER APRIL 15, 2005 Texas Governor Rick Perry photo: Alan Pogue opment, and job training programs. But as a practical matter, it is the “deal-closing” program that soaks up most of the attentionand moneyof the Enterprise Fund. Under this program, money is disbursed by the governor’s office with the approval of the House speaker and lieutenant governor to “close the deal” and ensure that businesses remain, relocate to, or expand in Texas. Most of the 50 states now play the corporate subsidies-cumtax breaks game. But Texas is just one of eight states that actually doles out cash subsidies to business. Texas’ kitty is also the fattestand probably the easiest to pick. In the hurried 2003 legislation, lawmakers placed economic development and tourism in the executive branch with few safeguards. To raise the $295 million for the Enterprise Fund, legislators raided the emergency “rainy day” fundat the same time that they were slashing human services and education spending.